eToro launching tokenized US equities, ETF and futures trading amid regulatory clarity

Crypto and stock trading platform eToro said Tuesday it is launching tokenized trading of U.S. equities, ETFs, and futures.

Co-founder and CEO Yoni Assia cited regulatory milestones as playing a role in eToro's launch.

"We’ve been long-term believers in a tokenized future. Blockchain technology will facilitate the greatest ever transfer of wealth, as traditional assets are tokenized and moved onto the blockchain," Assia said in a statement. "New regulations, such as MiCA in Europe and the passing of the Genius Act in the U.S., make the tokenization of real world assets a new opportunity to create digital assets that are legally backed and regulated."

The plan will allow retail investors to trade tokenized versions of popular U.S. equities — likely those primarily listed on the New York Stock Exchange and Nasdaq — via ERC-20 tokens on the Ethereum blockchain. Through a collaboration with CME Group, eToro will also offer tokenized futures trading.

"Our mission has always been to open the global markets. Extended hours trading was the first step, 24/5 takes it a step further, however tokenization brings 24/7 accessibility," Assia also said.

In 2019, eToro launched tokenized gold and silver products, it said in its statement.

eToro warned that trading tokenized equities outside traditional hours could face "low liquidity and high volatility," according to its statement.

Tokenized equities sparks debate

The tokenization of real-world assets, specifically U.S. equities, is seen as a major growth area across crypto. Trading platforms like Robinhood and Kraken are both interested in issuing digital tokens that mirror traditional stocks and trade 24/7. How exactly the U.S. Securities and Exchange Commission will treat tokenized equities remains unclear. 

While the move to allow for U.S. traders to buy and sell tokenized equities like Tesla, Apple, and Nvidia appears to be gaining momentum, presently the opportunity has largely been offered to investors located outside the United States.

Last week, Citadel Securities, one of the world's largest market makers, urged the SEC to treat tokenized equities the same as their more traditional counterparts amid the push from crypto firms to offer the new crypto-based product to their clients.

Citadel Securities said in its letter the SEC should avoid exemptions from securities rules and should focus on market liquidity and investor protection. SEC Chair Paul Atkins, historically an advocate for crypto, appears keen to devise a way to allow firms to tokenize stocks.

"It's hard to say exactly where things will go or what will happen, but assets clearly are moving on chain," Atkins recently said. "So if it can be tokenized, it will be tokenized."